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NGL Energy Partners' Q4 2025: Unraveling Contradictions in Water Volumes, Capital Flexibility, and Strategic Direction
Generated by AI AgentEarnings Decrypt
Thursday, May 29, 2025 9:51 pm ET1min read
Water logistics volumes and seasonality, capital spending flexibility, customer contracting and future growth, volatility in water volumes and recycling impact, strategic alternatives for the liquids business are the key contradictions discussed in Common Units' latest 2025Q4 earnings call.
Asset Sales and Debt Reduction:
- completed the sale of numerous assets, including 18 natural gas liquids terminals, Rack Marketing refined products business, Limestone Ranch ownership, and most of their Crude Oil railcar fleet, raising $270 million.
- These asset sales allowed to reduce its volatility and seasonality in adjusted EBITDA, eliminate working capital requirements, and pay off its entire outstanding indebtedness on the ABL.
Water Solutions Segment Growth:
- The Water Solutions segment reported adjusted EBITDA of $154.9 million in the fourth quarter, up 26% from the previous year.
- Growth was driven by increased disposal volumes, higher fees for interruptible spot volumes, and contributions from the LEX II pipeline.
Crude Oil Logistics Segment Challenges:
- Crude Oil Logistics adjusted EBITDA decreased to $13.1 million from $15.3 million in the prior year's fourth quarter.
- The decline was primarily due to a reduction in Grand Mesa pipeline volumes, averaging 56,000 barrels per day compared to 67,000 barrels per day the previous year.
Capital Expenditure and Future Growth:
- Total capital expenditures for fiscal 2026 are guided at $105 million, with $60 million allocated for growth projects in Water Solutions.
- The company is focusing on maintaining low capital expenditure levels while prioritizing growth in the Water Solutions segment.
Capital Structure Simplification:
- NGL Energy Partners purchased and retired 20,000 units of Class D preferreds in the open market at a discount.
- This action is part of NGL's ongoing effort to simplify its capital structure, increase free cash flow, and focus on lowering leverage.
Asset Sales and Debt Reduction:
- completed the sale of numerous assets, including 18 natural gas liquids terminals, Rack Marketing refined products business, Limestone Ranch ownership, and most of their Crude Oil railcar fleet, raising $270 million.
- These asset sales allowed to reduce its volatility and seasonality in adjusted EBITDA, eliminate working capital requirements, and pay off its entire outstanding indebtedness on the ABL.
Water Solutions Segment Growth:
- The Water Solutions segment reported adjusted EBITDA of $154.9 million in the fourth quarter, up 26% from the previous year.
- Growth was driven by increased disposal volumes, higher fees for interruptible spot volumes, and contributions from the LEX II pipeline.
Crude Oil Logistics Segment Challenges:
- Crude Oil Logistics adjusted EBITDA decreased to $13.1 million from $15.3 million in the prior year's fourth quarter.
- The decline was primarily due to a reduction in Grand Mesa pipeline volumes, averaging 56,000 barrels per day compared to 67,000 barrels per day the previous year.
Capital Expenditure and Future Growth:
- Total capital expenditures for fiscal 2026 are guided at $105 million, with $60 million allocated for growth projects in Water Solutions.
- The company is focusing on maintaining low capital expenditure levels while prioritizing growth in the Water Solutions segment.
Capital Structure Simplification:
- NGL Energy Partners purchased and retired 20,000 units of Class D preferreds in the open market at a discount.
- This action is part of NGL's ongoing effort to simplify its capital structure, increase free cash flow, and focus on lowering leverage.
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